Your business is nothing without your customers. Satisfied and happy customers become your loyal customers. Businesses need to know how happy their customers are so that they can provide a better customer experience. This can lead to increased brand awareness, customer satisfaction, order value, customer retention, and ROI.
Introducing Net Promoter Score (NPS) in your business’ daily operations can help you measure customer loyalty. It also gives you useful information on your customers’ thoughts about your products and services- like the benefits, the demerits, the lovers, and the haters. These details can be used to improve customer retention. Thus NPS can be one of your best customer retention strategies.
This blog is a complete guide to Net Promoter Score. It tells you what NPS is, how to calculate it, why it is important and lists some of the NPS best practices.
What is NPS?
Net Promoter Score is a benchmark that evaluates customer loyalty to a business or brand based on their feedback. It is a complex metric that tells you of your brand’s customer experience quality, customer loyalty and satisfaction levels, brand sentiment, organizational performance, and growth potential.
Unlike other benchmarks that measure a customer’s perception about a single purchase or interaction with your brand, NPS measures its overall sentiment about your brand.
How to calculate NPS?
You can calculate the NPS of your brand by surveying your customers on a single question- “How likely are you to recommend us to a friend?” Request to rate them on an 11 point scale 0 to 10. Once you receive the responses, categorize the respondents into the 3 groups based on their rating.
Categorize scores from 0 to 6 as detractors, scores from 7 to 8 as passives, and scores from 9 to 10 as promoters. Detractors are your unhappy customers, promoters are your most loyal customers, and passives are those “satisfied but unenthusiastic” customers.
Now, for calculating the NPS, disregard the passives, and subtract the percentage of detractors from the promoters’ percentage. This is your NPS. This can range from -100 to 100. For instance, if 40% of the respondents were promoters and 10% were detractors, your NPS score will be 30 (40-10).
Why is NPS important?
Different facets of the NPS make it the right approach for working on your customer loyalty. Here are the important features of NPS that make it indispensable for your business.
1It is simple and effective
NPS is very simple. You don’t need to invest a lot of time in learning and to understand it. Further, you can easily carry it out. Besides, it is also cost-effective. And your survey participants won’t need to invest any more than 30 seconds to respond, which increases the response rate and gives you a better picture.
2It measures customer loyalty
It’s cheaper to retain an existing user than to acquire new customers. Studies say that increased customer retention can increase your profits as well. NPS helps you measure your customer loyalty and the likelihood of customer churning —resorting to buying from another brand or canceling the subscription. So, you can work on ways to retain your customers.
3It helps segment your customers
Calculating NPS, segments your customers into three groups viz., promoters, detractors, and passives. This helps in determining who is interested in your products and services and who isn’t. Based on this, you can understand what user persona are your promoters, recognize customer expectations, and diagnose common issues with specific user personas. Further, customer segmentation into these three groups helps you assign high-touch resources to them where they need you the most.
4It paves the way for improvement
It is certainly disheartening when you receive a low NPS. However, it also presents you with an opportunity to direct all your focus towards improving your product or service as per customer feedback. When you conduct an NPS survey, do provide extra space for respondents to tell you why they gave the score they did.
5It promotes referral marketing
NPS gives you an idea of the likelihood of customers recommending your products or services to others. This has a lot of bearing on your brand’s reputation and revenue generation. Studies say that almost 66% of people tend to buy a product talked about by a friend over email or on social media. Further, referred customers have a greater ROI and higher lifetime value compared to others.
Since NPS tells you how happy your customers are, how you can work to keep them happy and improve your products or services, you get to make more customers happy and boost referral marketing.
6It helps address the needs of your detractors
It is crucial to focus on your detractors too. They may be your detractors because of mere misunderstanding or user error, or something bigger. By carrying out such investigations, you can make them feel valued, reduce their churn risk, or give negative reviews about your brand to others.
Net Promoter Score – Best Practices
Several facets of the NPS make it the right approach to improve customer loyalty. Here are the prime features of NPS that make it indispensable for your brand.
- Do say a “thank you” at the end of your survey. This will let the respondents know that you are grateful that they took the time and effort to respond.
- Distribute your NPS survey through different marketing channels, including email marketing, web push notifications, SMS, etc., to have a wider reach.
- Attend the feedback, both positive and negative. This can improve your NPS in the future.
- Focus on both promoters and detractors. This will help you make the most of your customers.
- Keep measuring NPS regularly to get precise scores. This will help you know in real-time how customers are reacting to the changes you are introducing.
- Get a tool that lets you easily interpret your results through data visualization. For instance, the NPS tool helps you get deep analytics and insights to help reduce churn and activate growth.
- Get instant notifications of low scores. Doing so will help you to respond promptly in real-time.
Rounding it all up, the Net Promoter Score is a benchmark that evaluates customer loyalty to a business or brand based on their feedback. You can calculate the NPS of your brand by surveying your customers on a single question- “On an 11-point scale (0 to 10), how likely are you to recommend us to a friend?” The responses not only help you calculate your NPS but also categorize your customers into three groups, viz., promoters, passives, and detractors.
NPS is important because it is simple and effective, measures customer loyalty, helps segment your customers, paves the way for improvement, promotes referral marketing, and helps address your detractors’ needs. You need to follow certain best practices to make NPS effective for your brand.
